The market exposure of the fund, which features in Citywire Selection, has also edged lower, as Milburn positions to reduce capital risk, believing that the majority of returns over the next few months will come more from income.

'From here, given the rally, most of our returns are likely to come from income, so we are positioning ourselves with lower beta to reduce our levels of capital risk,' Milburn said. The term 'beta' refers to the return of the stock market, with 'alpha' being the added value that active stock selection seeks to achieve.

At the end of June BB-rated bonds made up 36.2% of the fund, compared with 33% at the start if the year, while BBB-rated bonds have been increased from 6.2% to almost 9.5%.

Although Milburn believes that much of the recent issuance in the high-yield space has been of 'questionable quality' he has been adding new issuance in Swiss telecom firm Sunrise on a 5% yield, and a BBB-rated US dollar-denominated bond in German utility RWE.

RBS bond exposure

The fund remains wary of financials, but Milburn did recently add an Australian dollar-denominated bond in RBS(RBS.L) with a 6.5% coupon, which is callable in 2013 but matures in May 2018. Milburn thinks the chances of it being called early are slim as banks continue to pay down debt.

'It is currently trading at 75 cents in the dollar, and RBS will continue to follow its modus operandi so we would expect to see some further liability management exercises and a more appropriate form of capital. We get some uplift, and should get our money back in 2018 with an 11.5% yield in the meantime so it looks a great opportunity,' he said.

His only European bank exposure remains Dutch bank ING, which Milburn said is also paying down its debts steadily after government assistance.

The bond equates to 1.6% of the near-£1 billion fund, with Milburn and co-manager Melanie Mitchell rarely going over 2% in any position.

Telecoms overweight

Milburn continues to like bonds in the telecommuications sector, with the the sector making up around 25% of the portfolio. Key picks here include some subordinated debt in Dutch cable firm Ziggo, whose steady and recurring revenue streams make it a good defensive high yield pick, and Sprint Mobile, the third biggest mobile operator in the US.

Some 1.5% of the portfolio is in a 2016 dated Sprint bond, and a further 0.5% in a 2021 bond yielding 11.5%.

'They have a lot of work to do in terms of building up their 4G network, but it is still a $13 billion market cap company which is well owned in the US but not so well known here,' he said.